In an effort to further ramp up the crackdown on the cryptocurrency sector, U.S. regulators have leveled allegations of violating regulations against the world’s largest cryptocurrency exchange, Binance. Among the several points outlined by the CFTC in its 74-paged court filing, the crypto community has been quick to pick up on CFTC’s classification of cryptocurrencies — like Bitcoin, Ethereum and Litecoin — as commodities.
CFTC Labels Bitcoin As Commodity
CFTC Chair Rostin Behnam said in a statement that the US commodities watchdog is looking to continue to regulate the volatile and potentially insecure digital asset market. The Commodity Futures Trading Commission (CFTC) is responsible for the regulation of derivative products, such as financial contracts linked to commodities.
In its lawsuit against Binance exchange, the regulatory body was quoted as saying:
[Binance] operated a facility for the trading of futures, options, swaps, and leveraged retail commodity transactions involving digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.
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The CFTC further asserts in court documents that Binance’s extensive solicitation and access to customers based in the United States engaging in a variety of digital asset spot and derivative transactions involving commodities — contributed significantly to both the company’s trading volume and profitability.
Community Split Over Classification
The cryptocurrency community has been torn over by the recent characterization of cryptocurrencies. Even if many recognize and agree with the CFTC’s pro-commodity stand, confusion still lingers due to SEC chief Gary Gensler’s contention that “any cryptocurrency is a security” with the exception of bitcoin. In light of this news, Litecoin, the 13th largest altcoin by market share, has tweeted its acknowledgment of being identified as a commodity under Section 1a (9) of the Act, 7 U.S.C.
Certain digital assets, including LTC as alleged herein, are “commodities,” As defined under Section 1a(9) of the Act, 7 U.S.C. § 1a(9.
Litecoin is a Commodity. Nice to know we all agree on that now. pic.twitter.com/l1D0TDDnxK
— Litecoin (@litecoin) March 27, 2023
CFTC’s Prior Stance On Crypto
On March 9, while speaking to the Senate Agriculture Committee, CFTC chair Behnam argued that since Ethereum had been listed on CFTC exchanges for an extended period of time, the organization has a “direct jurisdictional hook” to regulate both ETH’s derivatives market and its underlying market. “We would not have allowed the Ether futures product to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset,” Behnam noted.
For the past few years, regulators have been debating whether cryptocurrencies should be categorized as securities or commodities. This classification decision would define which agency has primary responsibility for monitoring the crypto markets. Many in the cryptocurrency community have spoken out in favor of the CFTC as a more effective regulator than the SEC.
At the time of writing, the broader crypto market traded in the red with Bitcoin’s price suffering a 3% setback as a direct consequence of the Binance lawsuit while Ethereum exchanged hands at $1,707, down 3.5% in the past 24 hours.
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